Law firm mergers continued to lag behind 2018′s record-shattering pace, according to the latest data collected by consultancy Fairfax Associates.

Fairfax found just 16 completed mergers during the third quarter of 2019 and a total of 46 over the course of the year, down from the 57 completed through the first three quarters of 2018. Furthermore, blockbuster mergers have been absent from the scene, a point illustrated by the collapse of talks between Allen & Overy and O'Melveny & Myers in the middle of the quarter. Eighty percent of the 16 mergers were in the five-to-25-lawyer range.

Nonetheless, Fairfax analyst Lisa Smith said that there was no shortage of merger discussions between larger firms.

"It's surprising this year that we haven't seen the big mergers we have seen in the past," adding that she wouldn't rule out more significant combinations slated for Jan. 1, 2020, or beyond.

In spite of the dip from last year, the 46 mergers completed thus far is actually ahead of the historic average of 43 mergers through the first three quarters, based on data over the last 10 years.

Just two of the 16 mergers completed in the third quarter crossed national borders. Greenberg Traurig picked up 37 lawyers from its longstanding ally in Milan, Santa Maria Studio Legale, in one of the three largest deals of the quarter. As Dentons continues to bolt on existing firms around the world, it finalized a six-lawyer combination in Honduras with Gustavo Zacapa y Asociados, amid 10 other pending cross-border mergers.

That and two other international tie-ups earlier in the year mean that Dentons is responsible for 43% of the total number of cross-border mergers.

The largest merger in the quarter was a domestic one, where Seattle's Foster Pepper and Garvey Schubert Barer combined to create a new firm called Foster Garvey with approximately 200 lawyers.

Smith noted that in certain markets subject to increasing competition from national players, existing firms are feeling the pinch and looking to mergers to stay afloat.

"Where there's been a lot of consolidation in a market, smaller and midsized firms have a little more trouble competing," she said, pointing to Dallas as one example. There, SettlePou combined with The Berry Firm in the second quarter, one of two combinations in Texas. The other, in Houston, saw Spencer Fane combine with Zimmerman Axelrad Stern & Wise.

Other states home to multiple mergers in the quarter were California and Washington state, along with Washington, D.C., all with two.

Smith also flagged Minneapolis, Chicago and Boston as markets that have recently seen an incursion of outsiders, keeping the pressure on midsized firms. Elsewhere, midsized firms may be perfectly fine competing locally, even if they may struggle to compete regionally and nationally.

The other exception to this pressure, also recently identified by consultant Brad Hildebrandt, are specialty and boutique firms.

"Two hundred to 300 attorneys might be a perfectly viable and competitive platform," Smith said. "Size isn't as much of a factor as depth of practice and what they're known for."

Smith does not believe that growing doubts about the longevity of the current economic expansion, now the longest in history, are contributing to the slowing pace of mergers.

"It's not a front-and-center issue that impacts expansion," she said. "If anything, it pushes firms to think of having a broader, more diversified platform that would be better in the event of a contraction."

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